Sensex declined on Tuesday led by banking stocks, which fell on concerns that hike in deposit rates will hurt profitability. The European debt crisis and speculation over a possible interest rate rise in China also weighed on investor sentiments. Sensex declined 46.67, or 0.2%, to close at 19,934.64, while the Nifty slid 15.7 points, or 0.3%, to end at 5,976.55. The BSE 200 lost 0.4% to 2,486.45. Only 19 of the 30 Sensex stocks ended in green.

According to NSE provisional figures, foreign institutional investors (FIIs) sold equities worth Rs 523 crore on Tuesday and domestic institutions sold Rs 427-crore shares. FIIs have invested a record $29 billion in Indian equities so far this year, driving Sensex about 14% higher.

Mirae Asset Management CEO Arindam Ghosh said, ?From a global perspective, there is strong liquidity overhang and money is going to flow into emerging markets with both China and India being beneficiaries.? Fundamentals have taken a back seat and it?s liquidity that?s driving up prices, Ghosh added. ?The upside for emerging markets is strong and we feel that money will chase growth so as long as these growth targets are met money will flow in.?

The total turnover in the cash market was at Rs 17,844 crore, similar to the turnover seen on Monday though lower than daily average in the last six sessions. The F&O segment clocked a turnover of Rs 97,277 crore, lower than Monday?s level and in line with the average recorded in the last six sessions.

Emerging-market equity funds have taken in $84.3 billion this year, exceeding the record $83.3 billion received last year. Emerging-market equities saw net inflows of $2.4 billion in the week to November 24, 2010 of a total of $4 billion for stock funds worldwide, the Boston-based fund tracker said. According to BNP Paribas, the Sensex now trades at a price to earnings (P/E) multiple of approximately 16.3 times one year forward earnings which is about 7% higher than the long-term average of 15.1 times. At its peak valuation, the Sensex traded at a P/E multiple of 17.7 times one year forward earnings.